Australia’s G20 focus perfect, trade the best antidote to poverty

IN the wash-up of the G20, some commentators have suggested the wide-ranging speeches by other leaders — in particular the US President — show Australia was wrong to focus the agenda on trade to the exclusion of
other topics.

A more reasonable complaint would be that the time that could have been spent hammering out free trade agreements was instead spent discussing problems that persist in significant measure for lack of free trade agreements.

This is not to diminish anyone’s legitimate interest in anything from gender equity to Chinese repression in Tibet to the South Korean ferry disaster. But the right to protest, ending political repression, conquering hunger, justice for minorities and equal opportunities for women all depend on economic growth, and economic growth depends in large measure on trade. If the trade liberalisation proposals before the G20 were implemented, they would grow the world economy by $US3.4 billion and create 50 million jobs.

We can discuss a dozen other issues, as the G20 did, including corruption, transparency, tax avoidance and climate change. But year after year it is trade that does the heavy lifting, generating the growth that creates the wealth that feeds the poor and allows them to take their children out of work and send them to school. It’s growth that makes the wealth that spurs the middle class to demand political franchise, environmental standards, gender equality and rights for minorities.

Kym Anderson, the George Gollin professor of economics at the University of Adelaide, summed up the problem in a recent paper, arguing: “International trade is rarely on lists of top humanitarian problems. But with its rapid trade-driven growth in the past 30 years, China allowed 680 million people to lift themselves out of poverty.”

Anderson estimates that “concluding the World Trade Organisation’s currently stalled Doha trade round would add another 0.2 per cent — yielding global annual GDP in 2020 of about $US5 trillion more, with $US3 trillion going to the developing world”. Anderson estimates an increase in real income of 1.4 per cent a year for people in developing countries, compared with about 0.5 per cent for high-income countries.

Removing barriers to trade helps the poor because when we have unfree trade we “protect” ourselves from poor countries’ competitively priced goods, in particular agricultural products. While we throw a few pennies at the poor in foreign aid, we bar the door against them at great expense when they want to earn a living by their own hand selling us things we need at a good price.

Among all the slogans and antics, the most radical anti-poverty measure of any G20 group came from the businesspeople. Among the standard motherhood statements to plan, consider, lead, prioritise and commit to having a go at important stuff was a crisp summation of the opportunity the G20 must seize. The B20 proposed “free movement across borders of goods, services, labour and capital, which is the precondition of a truly global economy. The B20 proposes reforms that tackle trade protectionism, facilitate cross-border investment and better link available labour with productive work.”

This last point was not elaborated on for perhaps obvious reasons, but the freer movement of people has the potential to eradicate more poverty than a thousand-fold increase to the AusAID budget.

British economist Philippe Legrain, whose book Immigrants: Your Country Needs Them is a masterwork on the subject, writes: “Migrants born in poor countries and working in rich ones send home much more — some $US200 billion a year officially, perhaps another $US400 billion informally — than the miserly $US100 billion that Western governments give in aid. These remittances are not wasted on weapons or siphoned off into Swiss bank accounts; they go straight into the pockets of local people.”

He adds: “Politicians are forever urging people to be more mobile and to move to where the jobs are. But if it is a good thing for people to move from Kentucky to California in search of a better job, why is it so terrible for people to move from Mexico to the US to work?”

It may be spectacularly naive to argue on the basis that there could ever be any hope for the free movement of labour. So I will argue that if we cannot accept the labour of the poor, let us welcome at least the exported fruits of their labour. Let us welcome the coffee, the bananas and the sugar and stop “protecting” ourselves from enjoying the mutual bounty that free trade with our neighbours can bring.